Category Archives: Retail Technology and Security

by Jennifer Bosavage

Mobile Payments Start to Take Shape

Once upon a time, customers had very few options for mobile payments. Today, the technology is improving rapidly and options are growing. More than a quarter (27%) of consumers plan to use some form of mobile payment solution in the next year. Whether that type of payment will be through Apple Pay, Google Wallet or CurrentC — or through digital gift cards — remains to be seen. And a new player has arrived on the scene as well: Samsung’s LoopPay.

LoopPay is unique because it piggybacks on an older, pre-existing technology that virtually every retailer already has: the magnetic stripe. With LoopPay, a metallic coil generates a magnetic current that transmits to the magnetic strip card readers found in most modern payment terminals.In contrast, Apple Pay and Google Wallet are mobile payments services that depend on NFC hardware — the phone communicates wirelessly with the contactless payment terminal.

In adidition, digital gift cards are a large part of the overall mobile payment picture. eGift cards are emerging as part of retail’s payment and loyalty solutions. For example, Starbucks’ reloadable digital gift card acts as a brand’s own currency to add efficiency and reduce cost at the point of sale. But customers must be incented to participate is such programs, so they are rewarded with some of that savings in the form of loyalty points and discounts.

But those plastic cards may soon fade away, replaced by digital counterparts. eGift cards provide always-there access to the money stored on them. Research from eGifter found that 53% of consumers have reached for a plastic gift card only to realize it wasn’t on them when they were getting ready to pay for an item. That dynamic has contributed to more than $27 billion in gift cards going unused from 2007 through 2013, with another $1 billion

in spillage expected this year. While current gift card laws have reduced such spillage, mobile wallets are poised to further correct the problem. Digital gift cards are designed to work in tandem with digital wallets; however, when plastic cards are in the mix, 40 percent of consumers are willing to scan them into a digital wallet to be certain that they always have their cards when they need them.

As retailers implement mobile payment technology, consumers’ willingness to use a particular type or types of technology will determine which ones stores ultimately embrace.

by Jennifer Bosavage

Mobile Payment Fraud Grows, Vexing Retailers

Payment fraud is on the rise, as mobile commerce continues to grow in popularity. According to LexisNexis Risk Solutions’ annual True Cost of Fraud mobile study, m-commerce retailers lost 70 percent more sales to fraud in 2014 than they did in 2013. As the number of smartphone users steadily increases — statista.com estimates that there will be more than 196 million smartphone users in the U.S. by 2016 — fraud will continue to threaten merchants.

Consumers also have privacy concerns about m-commerce.

Consumers also have privacy concerns about m-commerce.

The recent figures equate to m-commerce merchants losing 1.36 percent of revenue overall to fraud, which is a significantly higher percentage than the total retail segment, which lost 0.68 percent of sales to fraud. For the 15% of merchants accepting mCommerce payments in 2014, mobile transactions accounted for just 14% of the total transaction volume — and also for 21% of the volume of fraudulent transactions. Further the costs associated with mobile channel fraud are more than three times the initial losses. So, why are m-commerce seemingly more prone to such misfortune?

One reason is that m-commerce merchants offer more ways to pay. The average mobile commerce merchant has an average of 4.5 payment options for consumers, many more than the average 2.6 provided by all retailers. Mobile merchants, therefore, have more fraud exposure.

The burden is especially heavy because mobile fraud tracking is the responsibility of merchants, and currently it is tracked together with online fraud. Presently, there is no distinction between those two channels. The LexisNexis report suggests, however, that the two be tracked separately: “As the percentage of fraudulent mobile transactions among all fraud is disproportionate to the percentage of all mobile transactions, it is clear that mCommerce comes with additional risk compared to other payment channels. Only when a merchant is able to disaggregate data by fraud channel will it be able to know where fraud is moving and whether or not solutions are working.”

The report also suggests types of solutions that can be implemented to help mitigate the impact of fraud on m-commerce merchants, such as device identification and geolocation. Currently, use rates are low for such online and mobile-oriented fraud prevention solutions. In addition, many retailers can identify the type of fraud they’ve experienced as well as strong potential solutions, but fail to act appropriately on that knowledge: “mCommerce merchants consistently display a disconnect between the fraud they encounter and their awareness and use of solutions. In addition to the specific challenges of mobile transactions, mCommerce merchants experience a high proportion of international fraud, yet they are not likely to use the solutions they believe are most effective for preventing fraudulent internationally-originating transactions.”

Still, the future is not entirely bleak. The researchers found that nearly half of this surveyed (48%) believe that adopting mobile payments is necessary to stay competitive, more than 1 in 3 (36%) plan on investing in this technology to increase efficiency and savings, and more than 1 in 4 (26%) plan on training employees on mobile payment technology.

by Jennifer Bosavage

With EMV Coming, Payment Security Becomes Job 1

Payment security is top of mind for retailers this year, according to a study released this week  from Boston Retail Partners (BRP). And, based on the numbers, it seems as though many retailers haven’t paid payment security much attention in recent years: 63% of respondents said this type of security was among their top three concerns, the highest number in the history of the 16-year-old survey.

Part of that commitment to secure transactions has to do with the rollout of EMV, also known as chip cards or chip and pin cards. While widespread in Europe, EMV is just rolling out in the United States. All retailers will be required to have EMV readers available by October 2015, or they face being liable for charges incurred by bogus cards. It is therefore not surprising that retailers are set to jump on solutions securing payment transactions; what is unusual is that the number of retailers planning to support EMV is expected to increase by 650%.

Last year’s seeming epidemic of breaches at several top retailers, in addition to high profile hacking on top of the approaching October 2015 EMV deadline, is giving security this sudden sense of urgency. But chip and pin aren’t the only weapons in the arsenal.

Survey respondents report implementing end-to-end encryption: 35% have already put solutions in place and another 45% plan to implement it by October. Overall, BRP projects a 151% increase in encryption within two years.

Finally, tokenization use will see a hike of 146% during the next five years. Tokenization lets retailers remove sensitive data in flight and at rest from their networks. One-third of the respondents have implemented tokenization for payment processing and another 40% plan to implement it before October 2015. One-third of the respondents have implemented tokenization for payment processing and another 40% plan to implement it before October 2015.

Increasingly, retailers are looking toward modern payment security solutions to protect sensitive customer and organization data. By moving to EMV and encryption in conjunction with tokenization, 2015 may be the beginning of a more secure retail environment.

by Jennifer Bosavage

Mobile Payment Hits the Big Time

Mobile payment is quite likely to be one of “the” big topics at the NRF Big Show, which starts  Sunday in New York City. Just as “omnichannel” and “customer-centric” were the focus of previous years, it’s a safe bet that mobile payment solutions will be a dominant player at the Javitz center next week.

Retailers need to embrace mobile payments.

Retailers need to embrace mobile payments.

A recent study conducted by Wakefield Research during the holiday shopping season found that most of the respondents were interested in paying for purchases at physical store locations with their smartphones. Fifty-three percent responded that it was important for more stores to install devices that let consumers pay with their devices, which seems to suggest that there is a willingness to pay via this method but the option is not always available. Age also seems to be a factor; 64 percent of respondents who were younger than 40 seemed most eager to pay using a mobile phone.

A few large retailers have implemented the technology needed to make mobile payments a reality for these shoppers, or they have announced plans to get on the bandwagon. That kind of publicity will further help speed user adoption. BI intelligence forecasts that US mobile payment volume will grow at a five-year compound annual growth rate of 172%. Apple Pay has seemingly lit a fuse: In just the month after it debuted, payments made through the feature comprised between 0.1% and 1.6% of transactions at five top retailers, according to BI Intelligence, which characterized that rate as “exceptional momentum.”

For mobile payments to become a viable option for consumers, not only must retailers invest in new hardware and software, but consumers must also be educated in what benefits the technology offers, as well as how information is protected. More than half of the Wakefield respondents (56 percent) said they would continue shopping at a store that had suffered a credit card information breach; however, the number of consumers who were less likely to continue shopping at such a store was still a significant 44 percent.

Retailers ought not miss the opportunity to educate customers on mobile payments — it could afford them the opportunity to continue to build a trusted relationship with the consumer, and there are substantial benefits for both parties using mobile payment technology. Among the top advantages to using smartphones instead of traditional payment methods cited in the Wakefield research:

#1 – Speed of use (34 percent)

#2 – Freedom from carrying a wallet (29 percent)

#3 – Access to mobile deals (24 percent)

#4 – Ease in tracking spending (23 percent)

#5 – Safety of personal data (18 percent)

The last is a critical point. Eighteen months ago, a Federal Reserve study noted that 42 percent of consumers were concerned about data security, and that concern was the most cited reason regarding why consumers have not used mobile payments. While consumers may have been skeptical about the security surrounding mobile payments, many (particularly Millennials) are concluding that with today’s technology, mobile payments might, in fact, be more secure than credit cards — even those with chip-and-pin technology. Ironically, secure mobile payments may, in fact, take off because of the recent spate of credit card hacks.

Certainly, there will be plenty of mobile technology to check out at the Big Show. See you there.

by Retail Pro

Use the cloud? Let’s talk security

Cloud computing has been among the most exciting and transformative technologies to hit corporate and consumer IT in history, while studies indicate a wealth of industries are already seeing these solutions deployed in ubiquitous fashion. Because of the ways in which cloud services can boost the efficiency and productivity of employees, systems and more, while simultaneously making assets available in a broader range of locations, the applications in retail are clear. 

Chances are that a growing majority of retailers are already using cloud-based solutions for a range of tasks and requirements, and are likely enjoying a wealth of advantages because of the decision to overhaul their IT frameworks with these revolutionary services. However, retailers will need to ensure that they are prioritizing security improvements when leveraging any type of new technology, and cloud is no exception. 

How to get it right
Talkin' Cloud recently listed several resolutions that cloud computing users should oblige in the new year, affirming that data control, storage behaviors and general awareness of threats among staff members should all be in the spotlight at the beginning of 2015. Remember, while the cloud is not inherently more or less secure than any other type of IT framework, the demands are a bit different when it comes to defending these environments from threats. 

According to the news provider, all businesses should understand the regulatory compliance statutes they are governed by when leveraging cloud computing services for data-related purposes, especially when that information is sensitive, such as credit card numbers. Additionally, the source stated that taking a comprehensive approach to cloud security, including the integration of BYOD policies and protections, can help firms further strengthen their defense against a variety of threats. 

Finally, Talkin' Cloud suggested becoming a bit more diligent and persistent in evaluations and assessments, working to proactively identify vulnerabilities before threats use them to wreak havoc on systems and data. 

Further considerations
Perhaps most importantly, retailers must commit to doing a better job of governing identities, access and credentials when using any type of technological framework in 2015, cloud or otherwise. Some of the most significant data breaches that have struck the industry in recent years have been traced back to poor credential and password management, meaning more prolific performances in these areas might effectively safeguard the company from disastrous events. 

by Jennifer Bosavage

CES 2015 Will Use Beacons: You Can Get There From Here

File this under putting one’s money were one’s mouth is: Today, the Consumer Electronics Show announced it would be using Beacon technology as part of an indoor positioning system for attendees. The navigation system is powered by Bluetooth Low Energy beacons, and will help attendees navigate the estimated four million square feet of show space.

The technology is similar to that which can be used inside stores to find products or service associates, as well as facilitate mobile payments. An attendee launches the CES app on his or her smartphone and then selects a show destination, such as an exhibitor’s booth. The app directs the user to the destination via beacons that have been placed within the show floor.

Beacon technology is spawning a number of retail projects that will expedite the adoption of mobile payments, as well as energize other areas of the overall shopping experience. For example, Index, which offers technology that analyzes consumer behavior, will support Bluetooth-based beacons to detect a customer’s presence and deliver personalized messages on a countertop iPad or even on the shopper’s mobile phone.

“We are excited to deploy our new indoor location technologies on such a massive scale,” said Marc Wallace, CEO and co-founder, Radius Networks, in a release. One are that the technology could be instrumental in popularizing within the retail segment is gamification. “Radius Networks previously partnered with CES to implement an award-winning scavenger hunt program at the 2014 CES that was designed to drive attendees to key areas of the show floor,” said Wallace. “Since then, proximity technology and the Internet of Things have taken off.  This year, we are excited to demonstrate how easy-to-deploy, low-cost beacons can completely change the way people approach indoor location.”

Gamification could be a big part of drumming up excitement in customers. For example, having customers opt-in to a treasure hunt helps retailers expose more merchandise to shoppers, who might otherwise have opted for a quick, focused shopping trip. Finding that hidden “treasure” might also mean identifying some impulse or add-on purchases, further extending the sale in an entertaining manner.

 

by Jennifer Bosavage

Apple Pay Heats Up Mobile Payment Popularity

The technology to make mobile payments is growing in popularity.

The technology to make mobile payments is growing in popularity.

Mobile payment strategies have been around for much longer than you may recall — but until Apple Pay rolled out this Fall the mention of “mobile wallets” prompted quite a bit of eye rolling. But remember how tablets were stuck in neutral until the iPad came along? A bit of that Apple magic has been sprinkled onto its payment solution, according to recent figures. This holiday season saw an increase in use of mobile payments, and that’s most certainly been driven by Apple Pay.

An ITG survey recently said that Apple Pay — which debuted on October 20— accounted for 1% of digital payments, while Google Wallet, launched in 2011, was responsible for 4%. The study’s authors noted that the 1% figure was impressive given that the service is only available to Apple customers with the newest hardware and it is currently supported by a relatively limited list of merchants. Sixty percent of new Apple Pay customers used Apple Pay on multiple days through November, suggesting strong customer engagement. In comparison, new PayPal customers used the service on multiple days during the same time period just 20% of the time.

Apple Pay could pose a major threat to market leader PayPal’s current dominance of the Mobile Payment space, according to Steve Weinstein, senior Internet analyst at ITG Investment Research. Weinstein said that PayPal’s infrastructure barriers, including challenging relationships with payment counterparties and no biometric capability, means it will be difficult for PayPal to match the ease of use and consumer appeal of Apple’s solution.

As the service grows in popularity, Apple will profit commensurately. Banks and payment networks will pay the iPhone maker more than 15 cents out of a $100 purchase. ApplePay uses NFC and Bluetooth to enable mobile, “touchless” payments. During in-store transactions, Apple passes a cryptogram and token to merchants using NFC, and Apple will be paying a (lower) “card present” rate. But, when using Bluetooth, or when making an in-app purchase using Apple Pay, the transaction fee will be the equivalent to a (higher) “card-not-present” rate. As the CEO of a company that specializes in gathering mobile shopper preferences mentioned to us yesterday: “Until Apple came out with ApplePay, no one was really thinking about using Bluetooth connectivity for this.” Indeed.

The challenge for Apple is that there are many perfectly good iPhones out there, whose owners are in no rush to upgrade. When and if they do upgrade to an iPhone 6, the number of mobile payments seems likely to jump. So, while the number of users using Apple Pay will likely grow significantly during 2015, it’s unlikely to “go viral,” so to speak.

In addition, many retailers are upgrade weary having just replaced — or are in the midst of swapping out — their swipe pads to implement chip-and-pin security measures, to meet the mandated deadline of October 2015. Adding an NFC reader to those devices is roughly $40.

And some retailers have opted to sign up with a competing, yet-to-be-seen offering from MCX, called CurrentC. The key will be how consumers take to CurrentC, which is being embraced by many top retailers, including Walmart, RiteAid and Target, at the exclusion of Apple Pay. By some estimates, that shuts Apple out of more than a trillion dollars in potential annual revenue.

We’ll know in the middle of next year whether Apple will pick up disillusioned CurrentC users, or pack up and leave the market to MCX.

Smart money may be on the Apple magic, but MCX may have a trick or two up its sleeve . What do you think?

 

 

 

 

by Jennifer Bosavage

Cloud Computing Helps Retailers Go Mobile

According to Forrester Research, the public cloud market is estimated to reach $191 billion by 2020, quite a boost from 2013’s $58 billion. Cloud applications will lead the charge, accounting for approximately $133 billion in revenue by 2020. Cloud platforms will bring in roughly $44 billion in sales, and cloud business services will amount to some $14 billion in revenue during that time.

At the same time, mobility is a prime objective for retailers, who are looking to improve flexibility among workers; retail executives are looking at cloud computing initiatives to fulfill that mission. In a new report released this week, “Elevating Business in the Cloud,” KPMG reported that companies are often choosing to implement cloud technology not only to improve cost efficiencies — which is the #1 reason — but also to facilitate a mobile workforce.

The survey was also conducted two years ago, when companies were first begining to implement BYOD strategies and create more mobile employee workforces. While just 15% of respondents in 2012 sited the enablement of a flexible and mobile workforce as a driver of cloud usage, in the recent survey 42 percent of respondents said mobility was a transformative mechanism to implement cloud solutions.

Perhaps more than any other group, retailers recognize the importance of using cloud to connect with consumers. Compared to other industries, retail executives in the survey were more likely to say their organizations are using cloud to improve alignment and interaction with customers, suppliers and business partners. According to the report:

“To maximize holiday revenue, for example, it is critical for retailers to turn to cloud solutions to attract and support mobile shoppers. Consider that Shop.org expects sales in November and December 2014 to grow between 8 and 11 percent over last holiday season – to as much as $105 billion. Mobile-optimized e-commerce or customer support tools, for example, can give retailers a competitive advantage during the peak holiday season, when providing personalized and instantaneous service is the new requirement for success. Retailers that aren’t able to respond to the expectations of empowered consumers will see them jumping ship, as they tap into online pricing and product information and seize the best deals elsewhere.”

Cloud computing can support initiatives such as clienteleing, a customer-centric approach that analyzes shoppers’ data and offers customized, personal solutions that can benefit retailers as well as their customers. Today’s shoppers are exacting: They want good value, quality service, a great all around experience.

As Jeanne Johnson, a Principal on KPMG’s Management Consulting team who focuses on consumer markets, pointed out in a statement, “Today’s empowered consumers expect more from their retail experience, and this adds pressure and uncertainty to retail businesses and operating models. Consumers expect to be known, recognized, and offered personalized insight and offerings. They want to interact with the brand in person, on-line, on the go – on their terms. They also prefer ready access to knowledgeable and responsive associates across those various channels.”

Cloud computing is making that personal experience a reality. Employees can access the cloud from wherever they are in a store;  transactions are no longer chained to the cash wrap. They can go where the action is — which is where the customer is. Increased employee productivity (54%) and higher employee satisfaction and flexibility (48%) are the top two benefits the survey respondents attributed to using cloud to improve workforce mobility, and greater productivity means higher transaction values for the retailer.

by Jennifer Bosavage

Internet of Things Connects Retailers with Revenue

The connection of devices offers businesses a great opportunity not only to collect data and learn about how customers interact, but also to gain insight on why certain products are popular — and others are duds. The Internet of things is a network of Internet-connected machinery that can offer a detailed glimpse of customer behavior.

The IoT has enormous market potential; GE Chairman and CEO Jeff Immelt has publicly said that GE would invest $1 billion in creating Industrial Internet technology and applications to help customers become more productive. Immelt estimates that “Industrial Internet” could add $10 to $15 trillion to global GDP during the next two decades. And research firm Gartner predicts that the IoT will comprise 26 billion units installed by 2020; by then, IoT product and service suppliers will produce incremental sales revenue of more than $300 billion, mostly in services.

In the retail segment, IoT can produce substantial savings, as well as be a catalyst for additional revenue. Knowing when stock of a particularly popular item is depleted, as well as who has bought it and who is likely to buy it can all be accomplished when devices are “talking” among themselves. Deliveries can be scheduled optimally and personalized promotions that are relevant to shoppers can be used to promote a “customer first” atmosphere. For instance, the store mannequin connected to a camera that is connected to facial recognition software can provide insight to store owners regarding who shops when, so other types of promotions can be used to drive store traffic at desirable times.

Gathering, storing and analyzing data that comes from the IoT can offer retailers information that can help them increase their businesses. PCs, tablets, backend systems can all be connected via small sensors. IoT enablement can help to blur the lines between in-store and e-commerce shopping experiences as virtual reality changing rooms and interactive displays are used to create an increasingly seamless experience.

Because the IoT is expected to expand swiftly— some figures say more than 30 percent annually — retail management software can help store owners take advantage of the trend. For example, some customers may use smartphones to shop online while others use tablets. Still others will feel most comfortable on a laptop computer. For retailers, that information can be very relevant as they continue to understand how their customers shop. Some customers will respond to improvements in point of sale at their brick and mortar, while others will appreciate an efficient site experience. The more a retailer knows about a customer’s shopping habits, the better it can serve that customer and anticipate his or her needs.

by Jennifer Bosavage

Chip And Pin Is Coming, Finally

In less than a year, chip and pin technology will move from retailer’s “nice to have” category to “have to have.” That’s because in October 2015, all credit cards will be equipped with chip and PIN functionality. Goodbye, magnetic stripe, hello improved security. But, it won’t arrive in time for payment processing for the holidays, and that’s unfortunate.

It would be great if retailers were currently in the thick of implementation of the technology, and that the new readers would be in widespread use this holiday season. Unfortunately, this technology — which aims to make in-store transactions virtually impossible to counterfeit — still isn’t in most stores and won’t be commonly available until next year. That’s the case despite the well publicized data breaches at retailers such as Nordstrom’s, Target and Home Depot.

Experts say that credit and debit cards in the United States are about 10 years behind the rest of the world. Chip and PIN cards, also referred to as “smart cards,” are used globally; many in the payments world are shocked that the United States has been so slow to adopt the protocol. The magnetic strip system used in the United States is simple to hack as it requires customers to simply supply a signature to authenticate a purchase. It’s pretty easy for criminals with victims’ credit cards in their possession to begin making purchases. We’ve all heard horror stories of thousands of dollars being charged before the credit card was cancelled.

Other times, thieves can also use information obtained by Internet hacking or skimming — secretly swiping a victim’s card on a card reader — to create clones of unsuspecting customers’ cards. A version of that technique was used last year at Target when 70 million credit card number were stolen.

Chip and PIN thwarts cloning of credit cards. Criminals trying to use lost or stolen cards with chip and PIN must know the PIN in order to be able to use the card in a transaction. Right now, Walmart is the only major retailer that currently accepts chip cards in its stores.

Last week, President Obama signed an executive order requiring that by January 1, 2015, all retail payment card terminals at federal agencies will be able to accept the chip-and-PIN technology, and all federal government-issued cards should also be equipped with the technology. According to the order: “While the U.S. Government’s credit, debit, and other payment card programs already include protections against fraud, the Government must further strengthen the security of consumer data and encourage the adoption of enhanced safeguards nationwide in a manner that protects privacy and confidentiality while maintaining an efficient and innovative financial system.”

Still, it’s been — and will continue to be — a long road for retailers large and small to make the conversion from magnetic stripe. An estimated 5 billion magnetic stripe payment cards are in use worldwide, with 15 million magnetic stripe POS terminals in the United States, according to market research publication The Nilson Report. Credit card and debit card fraud resulted in losses amounting to $11.27 billion during 2012, according to Nilson’s most recent figures.

Retailers incur $580.5 million in debit card fraud losses and spend $6.47 billion annually on credit and debit card fraud prevention annually, Nilson notes. RetailPro understands that saving on those costs would allow retailers to boost their bottom-lines and invest in better technology and increase inventories. We have recently partnered with payment technology innovator Merchant Warehouse to provide secure, value-added payment solutions.  MW’s Genius Engagement Platform, can accept any payment type, and can even evolve to accept yet-to-be-developed forms of payment. As a contactless EMV platform, retailers using the Genius platform qualify for elimination of PCI compliance, in accordance with Visa’s TIP program.

To learn more about the Genius solution for Retail Pro, go to https://www.retailpro.com/Solutions/Genius.php